The Ridiculous — and Chilling — IP3 Plan for Saudi Economic Diversification

Last week, I pointed out that the retired military generals of IP3, one of the companies that Michael Flynn dabbled with while looking into Saudi Arabia’s plan to develop nuclear power, viewed the US strategy in the Middle East as one of “resourcing conflict“.  I then looked a bit further into the security aspect of IP3’s proposals. But as we see in slide 9 of the IP3 PowerPoint presentation for the Saudi king from August of 2016, IP3 derives its name from “Peace” (the security plan), “Power” (the nuclear power plant construction) and “Prosperity”:

It seems that IP3 views “Prosperity” as encompassing diversification of the Saudi economy, and that somehow it will come about from the lower costs involved in nuclear power, a newly skilled workforce, water desalination and a “smart city”. But, if we also look at the IP3 article at Medium that I found earlier, we see more information on this economic plan. In fact, part of it is found in the same sentence as the “resourcing conflict” phrase:

We need a strategy that doesn’t rely solely on resourcing conflict with weapons sales, arms agreements, or new deployments of U.S. military forces, but one of empowerment through the intellectual capital and industrial might of our nation’s private sector.

Let that soak in for a second: we are talking here in the context of diversifying the Saudi economy, and IP3 is saying that the Saudis will be “empowered”, but that will come about “through the intellectual capital and industrial might of our nation’s private sector”. It’s the business brainpower and the actual businesses themselves from the US that are to drive building a vibrant Saudi economy that relies on more than just oil. From another part of the article:

The people of the Middle East and North Africa need clean, reliable electricity. They need water. They need more career opportunities, and jobs that do not rely on fossil fuel exports alone. They have bold ambitions for a more prosperous future and more inclusive societies.

Note also that this pitch from IP3 is meant to provide the US as an alternative to growing Russian influence in the Middle East. The PowerPoint presentation suggests working with China, although the Medium article proposes a US-only plan. [Side note: I’m currently very deep in the rabbit hole of the various corporate groups and their changing alliances through the past few years, along with the various power plant agreements that countries in the area have executed to date. It’s very complex and has changed very many times. If I find anything useful in the analysis, especially how Flynn fits into the various groups, it will be another post in this series.] In that context, IP3 laments that the US is at a disadvantage, because the competing operations from Russia and China are state-supported:

As a recent report from the Carnegie Endowment for International Peace notes, both countries “receive significant state support for their ambitious technology export plans,” …

It really seems that what IP3 wants is a situation in which the the company gets all the benefits of “free enterprise” but also enjoys the sizable advantage of being the “chosen one” to get the imprimatur of the US government so that competing groups are excluded. That would explain why Flynn faces so much more potential legal trouble if the reports of him continuing to push one or more of the competing proposals once he became National Security Advisor turn out to be true, especially if he still stood to profit from the work.

But why nuclear in the first place? Of course, peak oil is coming, and so the Saudis know they have to wean themselves from their dependence on oil for domestic energy consumption. The World Nuclear Association gives some hard numbers for Saudi needs and the evolution of their plans for diversification:

Saudi Arabia’s population has grown from 4 million in 1960 to over 31 million in 2016. It is the main electricity producer and consumer in the Gulf States, with 338 TWh gross production in 2015, 150 TWh from oil and 189 TWh from gas. It consumes over one-quarter of its oil production, and while energy demand is projected to increase substantially, oil production is not, and by 2030 a large proportion will be consumed domestically, much of it for electricity generation. Its per capita consumption is about 9000 kWh/yr, heavily subsidised.

Generating capacity is over 30 GWe. Demand is growing by 8-10% per year and peak demand is expected to be 70 GWe by 2020 and 120 GWe by 2032, driven partly by desalination increase.

I was pretty surprised by this. I viewed Saudi oil production as being much larger than domestic consumption, so the fact that they already consume a quarter of their production and their domestic generation capacity will need to expand up to four fold in only 15 years puts them on the brink of catastrophe. Their planning to diversify has started, but changed recently:

It had plans to install 24 GWe of renewable electricity capacity by 2020, and 50 GWe by 2032 or 2040, and was looking at the prospects of exporting up to 10 GWe of this to Italy or Spain during winter when much generating capacity is under-utilised (cooling accounts for over half the capacity in summer). The 50 GWe in 2032 (later: 2040) was to comprise 25 GWe CSP [Ed note: CSP = Concentrated Solar Power], 16 GWe solar PV, 4 GWe geothermal and waste (together supplying 150-190 TWh, 23-30% of power), complementing 18 GWe nuclear (supplying 131 TWh/yr, 20% of power), and supplemented by 60.5 GWe hydrocarbon capacity which would be little used (c10 GWe) for half the year. The nuclear target date has now been put back to 2040. In 2016 renewables targets were scaled back from 50% to 10% of electricity (by 2040?) as plans shifted more to gas, so that it would increase its share from 50% to 70%.

That earlier plan looked pretty reasonable, with most of the increases in power generation coming from a mix of renewable sources. But that all changed in 2016, with renewables getting cut substantially, from a 50% target down to only 10% and the share of generation accounted for by natural gas actually increasing from 50% to 70%. So what happened to cause this switch away from renewables and back to natural gas (even while some of the discussions on nuclear are continuing)? [Note that a 1.2 GWe solar power plant is opening soon elsewhere in the Middle East, so the Saudis are falling behind on solar.] For one thing, the price of natural gas dropped by about 60% from early 2014 to the beginning of 2016. That timeframe also coincides with the rising influence of Mohammed bin Salman, as his father became king in 2015 and MBS was named Crown Prince this summer.

As Vox explained to us recently, MBS’s “purge” was all about Saudi life after oil. But like his best buddies in the Trump Administration, he can’t really seem to get anything right. Note that gas prices have now re-stabilized at only about 25% lower than they were during most of 2013 to 2015. Also, remember the “smart city” in the IP3 presentation? Bruce Riedel described that and other bits of MBS’s “reforms” to the New Yorker:

“The Saudi Vision 2030 is increasingly turning out to be a failure in economic terms. It has more and more the characteristics of a Ponzi scheme. This new city, Neom, in the Gulf of Aqaba that is supposed to attract five hundred billion dollars of investment and where normal rules of Saudi society aren’t going to apply—meaning women can do things—will have more robots than people. This isn’t serious. This is the kind of thing used to divert people from the real issues,” Riedel said.

The Crown Prince’s regional strategy has also either stalled or backfired, too. “His signature policy is the Yemen war, which has come home to haunt Riyadh,” Riedel, now at the Brookings Institution, said. “Its Qatar blockade is a failure. It wants Qatar to be like Bahrain, just an appendage. And Qatar hasn’t given in.”

That’s pretty much how it seems to me, too. I really don’t buy any of the lip service that the changes MBS is bringing about are aimed at bringing more liberal thought into the kingdom or improving the lives of the general population. I see a huge power grab at a level that makes Trump and MBS buddy Kusher jealous. A purge that results in torture of those detained looks much more like consolidation of power than a move toward a more open society.

And that’s why the collection of technology aimed at “security” of the proposed nuclear sites makes me think it’s all about keeping the population in line as more and more rivals are eliminated. I also think that’s why various US companies have been jostling to be in line when contracts start getting handed out.

As a postscript, I would also note this Intercept article on Erik Prince and the push for privatized intelligence sources. Recall I felt like he had a hidden hand in the Iron Bridge model of security ostensibly around the power plants, as well. Somehow, all these plans with private companies and governments working together in new areas starts to get pretty creepy.

Many years ago, Jim got a BA in Radiation Biophysics from the University of Kansas. He then got a PhD in Molecular Biology from UCLA and did postdoctoral research in yeast genetics at UC Berkeley and mouse retroviruses at Stanford. He joined biosys in Palo Alto, producing insect parasitic nematodes for pest control. In the early 1990’s, he moved to Gainesville, FL and founded a company that eventually became Entomos. He left the firm as it reorganized into Pasteuria Biosciences and chose not to found a new firm due a clash of values with venture capital investors, who generally lack all values. Upon leaving, he chose to be a stay at home dad, gentleman farmer, cook and horse wrangler. He discovered the online world through commenting at Glenn Greenwald’s blog in the Salon days and was involved in the briefly successful Chris Dodd move to block the bill to renew FISA. He then went on to blog at Firedoglake and served a brief stint as evening editor there. When the Emptywheel blog moved out of Firedoglake back to standalone status, Jim tagged along and blogged on anthrax, viruses, John Galt, Pakistan and Afghanistan. He is now a mostly lapsed blogger looking for a work-around to the depressing realization that pointing out the details of government malfeasance and elite immunity has approximately zero effect.

29 replies
  1. matt says:

    Great post. Shows that there is quite a concerted effort to go a new direction in the Middle East. I guess it’s slightly better than the current MIC vision of perpetually producing war/mayhem. At least now, there is a plan for peace (control) via an embedded security state, just like here in the US.

  2. earlofhuntingdon says:

    IP3 laments that the US is at a disadvantage, because the competing operations from Russia and China are state-supported.

    That made me laugh.  The ownership and methods are different, but US industry is abundantly supported by the state.

    • Jim White says:

      Well, yes, we are indeed a corporatist state these days.  Somehow, though, what I think they are afte here is a much more extreme version of that.

  3. earlofhuntingdon says:

    If Neom were about building a more open society, about educating, enabling and gainfully employing average Saudis, Neom would have far more jobs for people than robots.  It would not be modeled around an Amazon or Apple infocity, which is based on gathering the most minute data about people’s lives – not to make their lives better, but to enable profits and control.

  4. earlofhuntingdon says:

    Forced opening of a national economy to large foreign corporations never bodes well.  It’s why China, Japan and the Asian Tigers had such elaborate rules to protect themselves, and it’s a significant part of their growth and health.  It’s probably why most Russians wish they had had the same before American neoliberal consultants drove their economy into the ditch.

    The Saudi rulers have shown no penchant for openness or liberality, and none for enhancing the economic independence or well-being of their average subject.  Massive investment and development would be intended to further grow the wealth and control of the rulers.  Enhanced security capability would be part and parcel of further domestic economic development.

    • matt says:

      …further domestic economic development… is the only solution to keep the consumption/capitalist game going.  It’s nice that “they” are thinking one and a half steps ahead of perpetual war and peak oil, but we have peak population, peak arable land, and peak carbon dioxide looming in the next century.  Somehow humanity will have to create a culture/economy that can mitigate these disasters.

  5. wayoutwest says:

    There seems to be much confusion here and elsewhere about what the term Peak Oil means. It does not mean we are running out of oil but it points to a time somewhere in the future when we can’t meet new rising demand and replace depletion losses. The Saudis and the US will be pumping oil a hundred years from now, probably less than now but still producing.

    What worries the oil industry now is Peak Oil Demand that could be reached before Peak Oil. This would drive prices down and could destroy the financial system that makes exploration and new production possible.

    The Saudis have the chance to diversify now with plenty of wealth to enable the transition. They don’t need to sell the farm and are only offering 5% of Saudi Aramco for sale and that money will be added to the rest of SA stock in an investment fund. Oil will continue to play a huge role in their economy just not as the only component.

    The Saudis cutting back the solar/wind component of their power plans means they have people who can do basic math aren’t too conditioned by Warmer propaganda and can resist NWO/UN mandates. These so called renewables are too expensive, intermittent amd require replacement every twenty years or less. Even with all the sunny days the Saudis enjoy they still can’t get them to generate power at night or during sandstorms. OIl is too valuable and useful to use for electric generation and they have access to plenty of natural gas.

    Saudi Nuke power plans are another story that may have something to do with the Iran Nuke deal. Their statements about the Iran deal stated it was a template for what is acceptable for their own Nuke weapons research and development.

    • earlofhuntingdon says:

      Your comments suggest an unfamiliarity with the dramatically dropping prices in wind and solar.  Of all the gin joints in all the towns in all the world, what geography would be better-suited to renewables than the KSA? And who has more money with which to buy them?

      Someone in the KSA already made that observation – even before the dramatic price drops – but their plans were derailed via regime change. By whom, with whose assistance? I would start with the usual fossil fuel suspects and their intel agency pals.

    • TomVet says:

      You seem to have missed the memo on Peak CO2. If we’re still pumping and burning oil for 100 years, there won’t be another 100 years.

  6. bell says:

    thanks jim.. good post and overview… and i like some of the things earl of h says too.. it is really too bad the usa is so in bed with saudi arabia and there wahabbi death cult ideology… mbs will be the captain who goes down with the ksa ship and frankly – it can’t happen soon enough for all the export of a rabid version of islam to the various mosques and madrassas around the globe the past 40 years.. fortunately they are running out of money for that here, having inflicted many innocent minds already… i just don’t see ksa surviving in anything like it’s present form… uae is a different story under mbz, although they are just as ruthless when it comes to making war on yemen trying to impose their isis/al qaeda/erik prince mercenary gang with their oil wealth.. i don’t wish them well either.. i do wonder how much usa gets dragged down thanks their close ties and support for ksa… not sure who will be around to pick up the pieces.. thanks for the informative article..

  7. wayoutwest says:

    @Earl

    The cost of Chinese solar panels has certainly decreased dramatically but panels are only one component in a solar power system. Investors in large solar projects are mining the large subsidies and when they end there will be little incentive to invest in expensive intermittent solar systems. An example of the real costs to the consumer is seen in Australia’s mandated conversion where consumers have seen their electric rates double and Germany has a similar story. One of the biggest costs for a solar system is that there must be a dedicated fossil fuel fired backup generating capacity. It has to be ready 24/7/365 to not only generate at night but anytime clouds or dust block the sun. If the solar operator has no backup they must buy power on the spot market often at many times the normal rate.

    Big fossil fuel has a duty to inform their shareholders and customers about the real costs and usefullness of solar/wind. Their ability to deliver reasonablly priced high energy fuels and electric power is threatened by the Green Blob but some of them have already submitted to the Warmer agenda.

  8. earlofhuntingdon says:

    Keep swinging for the fence; strikeouts imminent.

    The whole point of developing multiple sources of renewables is ultimately to avoid dependence on fossil fuel plants as the default source of power.  Few countries would have better terrain and weather than the KSA to develop these.

    It’s not just Chinese sourcing of panels that are seeing prices drop.  As for the implied denigration that they are “Chinese”: Develop and build your own.  Stop relying on the Chinese for all the world’s manufacturing.  Manufacturing is not a kind of leprosy and its practice is not suitable only for the colonies.  That’s a canard put out by neoliberal financiers, who would happily extract cash from any source but their own pockets, especially the assets and people needed to keep a business as a going concern.  Manufacturing is a fundamental source of technology, know-how, resilience, education and employment.  The alternative is to be poor or to learn German or Chinese.

  9. wayoutwest says:

    @Earl

    You are selling snake-oil with unidentified multiple sources of unreliable intermittent energy. none of which can replace gasoline or coal. The KSA with their abundant sunshine can produce solar power for about 8 hours a day and wind is not much better.

    We can’t compete with China in building solar panels but we do make high-end products like Musk’s solar shingle systems for wealthier consumers. and one solar company was using prison labor to keep their prices down.

    Reducing reliance on fossil fuels to any degree resembling the Big Green agenda means dramatically reducing our standard of living and denying the developing world the right to develop. Trying to hide these facts behind wishful thinking and snake-oil rhetoric is a distraction useful in stealing bases but you end up in a pickle.

    • orionATL says:

      wayoutwest,

      what a blowhard rightwing windmill you are, with your memorized kochsuckers’ carbo-psuedo-facts and your disingenuous concern for “our standard of living” and “denying the 3rd world the right to develop” claptrap. just another way-out-in-rightfield kochsucker sockpuppet.

      global warming due to human use of carbon energy sources is a big fact of life and a big fact we have only a few more years to deal with effectively. arctic and anarctic ice loss alone is enough to demonstrate the necesditym

      • wayoutwest says:

        Orion, you are displaying a classic example of cognative dissonance allowing a few facts that counter your belief system to drive you to parroting the Warmer consesus. You can’t hide behind the Koch brothers any longer because the skeptic’s are relying on NASA, NOAA and even the IPCC reports for facts to counter a political agenda.

        Few CAGW skeptics are claiming that there is no effect from higher CO2 levels but they and the IPCC’s own research has shown that the effect is grossely exagerated in the Warmer computer models. These models were falsified by actual comparisons of predicted temperature rise with measured lower temperature rise data.

        NASA studies show that the Antarctic ice sheet mass has changed little if at all in the last 100 years. There has been worried reports about the western antarctic where glaciers and the ice cap are melting but a recent survey discovered 91 additional volcanoes under this area and growth in ice in other areas has equaled or exceeded this loss.

        The Arctic ice melt has been monitered and measured for years now and blamed on CAGW but the IPCC’s computer models failed to predict this dramatic change. They predicted it wouldn’t happen until higher CO2 levels and average temperature caused it in about 2070. The retreat won’t leave an ice free Arctic as predicted for today, some recovery is being observed and polar bears are doing fine. The best explination for this melting is changing weather patterns and ocean currents driving warmer water north. FYI, the IPCC also reproted the inconvenient fact that there has been no increase in the rate of sea level rise in the last 100 years.

        • orionATL says:

          wayoutwest –

          “… You can’t hide behind the Koch brothers any longer because the skeptic’s are relying on NASA, NOAA and even the IPCC reports for facts to counter a political agenda…”

          that statement is flagrantly false unless you replace “are relying on” with “are cherry picking”.

          the fossil fuel corporations are using the same tactics that wealthy and politically influential tobbacco corporations used generations earlier. the fossil fuel boys know, and have acknowledged in internal corporate documents, that global warming caused by humans is a reality.

          as for your comments here, you’re the same rightwing blowhard and con artist you’ve always been when writing here. only this time you’re reading from a coal&oil brothers’ script. like i said above, a rightwing propaganda puppet.

          in case you haven’t read them, the internet is full of global warming debates featuring your knowledgeable-sounding, psuedo-scientific facts obediantly taken from the coal&oil boys’ playbook. having watched this fossil fuels kabuki for years, i’m certain there is not a statement you make above that cannot be demonstrated to be misleading or false.

          as for your deploying cognitive dissonance in your argument, you could not acknowledge cognitive dissonance if it bit you in the ass.

          you don’t understand that cognitive dissonce is the psychological engine that runs rightwing blather exploitating solid science.

          • Rayne says:

            I wouldn’t waste my time on WWO’s tired and false arguments which only serve plutocrats. Reading them is as amusing as reading about the Flat Earther who built a homemade rocket to prove the earth was flat. We can only wait for the day they discover the earth is hard. Of course we’ll probably have to foot the bill for law enforcement, emergency response, and health care subsidies in the wake of discovery, just like we’ll have to foot the bill when seas rise, hurricanes grow to new size and force, and fires eat plutocrats’ homes (like Rupert Murdoch’s house near Ventura this week) while denialists slowly learn the truth.

            (Always amazes me how these same denialists happily use the internet to decry one field of science while ignoring the science at their fingertips.)

            • orionATL says:

              you’re right. this one is not worth hunting to ground.

              +

              rayne:

              “… Of course we’ll probably have to foot the bill for law enforcement, emergency response, and health care subsidies in the wake of discovery, just like we’ll have to foot the bill when seas rise, hurricanes grow to new size and force, and fires eat plutocrats’ homes… ”

              like we’ve had to foot the bills (still coming in, despite the tobacco settlement) for tobacco illnesses.

              and like we are footing the enormous social and medical bill for the opioid epidemic which appears to be traceable to one business family’s drug selling empire:

              https://www.newyorker.com/magazine/2017/10/30/the-family-that-built-an-empire-of-pain

              note: the drug sellers’ and generations of their families get to keep and grow their 10’s of millions into 100’s of millions and their 100’s of millions into billions.

              • orionATL says:

                and our governments get sent the bills for clean up.

                just as the congressmen, regulators, and lobbyists who facilitated the particular corporate damage begin their traditional keening about high taxes, high debt, and excessive regulation.

              • wayoutwest says:

                @Orion

                You put on a fabulous display of sandbagging and whataboutism that would make Al Gore and his commie friends at CoR proud but the Warmer castle has been breached by the heretics. The call is now for ‘once more unto the breach, my friends’ and the Warmer false beliefs will be overthrown.

                All you, Rayne and the CoR can do is hiss and spit as the heretics pour through the breach trying to illuminate the dark true believers minds.

  10. What Constitution? says:

    Nice charts.  Not entirely sure I am entirely comfortable with this set of actors identifying “thought leadership” as something they might help provide, nor am I comfortable with them placing that in their “militarization and surveillance” category or, for that matter, with putting the concept last on that part of the list, i.e. as a mitigating afterthought.  Reminds of the Watergate slogan “when you’ve got them by the balls, their hearts and minds will follow.”  Or Toby Ziegler’s “they’ll like us when we win” mantra in West Wing’s middle east peace process discussions.

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